Illinois Attorney General Kwame Raoul wants to have it both ways with two legal arrangements his office struck last week with Nicor Gas, the largest natural gas utility in Illinois, serving most of suburban Chicagoland.
On the one hand, Raoul got Nicor last week to agree to slice its requested rate hike by more than 60% to $82 million from $221 million. That will mean an average monthly gas bill increase of $2.21 for the typical household rather than $6. As winter approaches, that’s a significant concession, particularly following years of relentless delivery rate increases by Nicor, which serves 2.3 million suburban customers.
On the other, a second stipulation Raoul struck with the company appears to require them to do everything possible to invest in capital projects at the same level they proposed when they requested the far higher rate increase. Why? The stated reason is to preserve union jobs both within the company and at outside contractors performing much of the pipe replacement and other infrastructure work that has driven these inflated rates.
Nicor doesn’t directly employ the union workers at those contractors. It isn’t — and shouldn’t be — responsible for ensuring they have work. Nor should Nicor’s customers.
Moreover, pipefitters, engineers and the like aren’t exactly hurting for opportunities these days, and those contractors surely could find other clients if Nicor had to trim its infrastructure plans.
In celebrating the first part of the deal — the lower rate increase — Raoul’s office said in a press release that his objection to Nicor’s original request stemmed from “significant portions of Nicor’s forecasted capital spending program that were overstated or unnecessary.”
We’re on board there.
But Raoul contradicts himself in the second part of the deal by insisting that Nicor adhere to that same forecast capital spending program he’d alleged was bloated.
Here’s the language from the second settlement: “Nicor Gas commits that it shall use commercially reasonable efforts to execute the Forecasted Capital Investment (and maintain capital investment levels), through the end of the 2027 Test Year. Nicor Gas will do so in a manner consistent with the nature and scope of contracted work such that Bargaining Unit Contractor levels are at or above those levels as of December 31, 2026, or as of the date or as of the date the (Illinois Commerce) Commission enters the Final Order in the 2026 rate case, whichever is earlier.”
In other words, keep organized labor’s gravy train rolling even though it’s based in part on work that is needless.
In a post on X, Raoul’s office said, “Our settlement ensures Nicor can continue to retain good jobs while protecting consumers from drastic rate increases.”
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In the attorney general’s view, apparently, there is such a thing as a free lunch.
Except we all know better, don’t we?
Sure, Nicor won’t get the full rate increase it said it needed to support the capital budget that Raoul thinks is necessary to keep all those union workers employed. At least not for now.
But Nicor surely will seek higher rates in the future to cover the cost of that investment (plus a profit). Its customers will be asked to foot the bill for this “overstated and unnecessary” spending one way or the other.
As we’ve written before, that’s how utility regulation works. The more a utility invests in its delivery system, the more revenue it requires from ratepayers to absorb the cost and earn an added regulated return on the investment. That’s how utilities grow earnings. The only barrier is the regulators at the Illinois Commerce Commission, who rule after the fact on whether that spending was necessary or not.
It is true that there’s language in the jobs-related stipulation asserting that regulators shouldn’t treat it as a precedent nor automatically deem the spending appropriate in a future rate proceeding. But in any upcoming rate-hike request, Nicor will have a decent argument when it tries to collect, given that the AG’s deal with the company effectively directs it to spend the money.
It was telling that consumer groups such as Illinois PIRG and the Citizens Utility Board were parties to the first settlement but didn’t sign onto the job protections deal.
Here’s what should happen: The ICC ought to approve the AG’s deal that blunts the rate-hike effect while rejecting the AG’s nonsensical jobs deal that undermines the laudable rate settlement.
And if that happens it won’t be a tragedy if Nicor really does have to cut some contractors loose. Those outfits will have no problem finding data centers or other infrastructure developers to replace whatever business they lose from Nicor.
Ratepayers don’t have a choice when it comes to heating their homes and have shouldered the burden already of repeated rate hikes. They shouldn’t have to finance trade union payrolls in perpetuity.
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